Tag: Office for Budget Responsibility

Osborne has failed to publish the new Charter for Budget Responsibility that he promised.

 

Last autumn, the Tories cynically vetoed Ed Balls’s plan to allow the Office for Budget Responsibility to audit Labour’s manifestoEd Ball’s said:

“In tough times it’s even more important that all our policies and commitments are properly costed and funded.

The British people rightly want to know that the sums add up. So we will go one step further and ask the independent Office for Budget Responsibility (OBR) – the watchdog set up by this government – to independently audit the costings of every individual spending and tax measure in Labour’s manifesto at the next election.”

This is the first time a Shadow Chancellor – the first time any political party in Britain – has ever said it wants this kind of independent audit. A radical change from what’s gone before, but the right thing to do to help restore public trust in politics. The Tories have persistently lied  about Labour’s economic performance, claiming that Labour borrowed “too much,” yet Osborne has borrowed more in 4 years than every Labour administration since 1900 combined.

Whilst the Labour Party invested what they borrowed in public services, at a time of global financial crisis, to protect the poorest from the worst of the consequences inflicted on us by the bankers and financial sector, the Coalition have not only got nothing to show for the money they’ve added to the debt, they have inflicted additional cuts on the poorest, leaving many citizens vulnerable to absolute poverty.

Osborne’s refusal to allow the OBR to audit policies is clearly an indication that he intends to continue to attempt discrediting what has been confirmed internationally as a sound economic approach from Labour, whilst ensuring Conservative policy proposals avoid scrutiny.

The Tories’ decision is entirely politically motivated` and certainly not in the public’s best interests. There is no reason in principle why they should refuse to allow the watchdog founded by Osborne in 2010 to audit Labour’s policies.

There is no sign of the updated Charter for Budget Responsibility that the Chancellor promised would be published by now. It was to be another of George Osborne’s political traps laid for the opposition in an attempt to undermine their economic credibility. In his recent Autumn Statement, the Chancellor promised an updated Charter for Budget Responsibility committing the government (and in theory a Labour administration) to an aggressive pace of deficit reduction. He said:

“Next week we will publish a new Charter for Budget Responsibility that will reinforce our commitment to finish the job in the next Parliament, and we will ask the House to vote on it in the new year.”

The implicit aim was to force Labour to either match his plans, and commit to billions of pounds of additional cuts (something which wouldn’t be well received by the left and the trade unions), or to oppose them and be denounced as fiscally irresponsible.

Chris Leslie MP, Labour’s shadow chief secretary to the Treasury, commenting on George Osborne’s failure to publish as he promised a new Charter for Budget Responsibility in the week following the Autumn Statement, said:

“George Osborne’s latest stunt has become a shambles.

“In the Budget George Osborne was talking about a vote on balancing the overall budget. Then last month the Treasury tried to lay the ground for a big u-turn by briefing that the vote would only be on balancing the current budget, excluding capital investment.

“And now, after all the hype and promises that a new Charter would have been published over the last week, the government has totally failed to publish anything. This is a total mess. As ever, these so called Tory traps are backfiring on the Chancellor.

“Labour has set out a tough but balanced approach to get the current budget into surplus and the national debt falling as soon as possible in the next Parliament.

“Our first election pledge announced this week is that we will balance the books and cut the deficit every year, while securing the future of our NHS. This will require sensible spending cuts in non-protected areas, fairer choices including reversing the Tory tax cut for millionaires and a plan to deliver the rising living standards and stronger growth needed to balance the books.

“In contrast the Tories are pursuing an increasingly unbalanced and extreme approach. They have chosen to pencil in even deeper spending cuts, which would return public spending to a share of GDP last seen in the 1930s.

“They are refusing to ask those with the broadest shoulders to make a greater contribution and ignoring the need for a plan to deliver the rising living standards that are vital to getting the deficit down. And they have now made £7 billion of unfunded tax promises, which can only be paid for by even deeper cuts to public spending or another Tory VAT rise.

“George Osborne should spend less time playing silly political games and more time sorting out the economy and trying to make his sums add up.”

Update

Without any further announcement to the opposition, the government has published its Charter on Budget Responsibility. In his economy speech this afternoon, David Cameron announced that the Charter “would have the structural current budget into balance” in 2017/18, which appears to enshrine into law the Labour plan that he is attacking in the same speech.

 Cameron has defended Conservative plans for public spending cuts through the next parliament as “sensible and reasonable”, claiming that Britain was still vulnerable to being “tipped over the edge” by another financial crash.

 Cameron was joined by George Osborne in arguing that the next government had a duty to run a budget surplus, in what is set to become one of the defining issues of the general election next May.

Labour  have accused the Tories of an “ideological” obsession with cutting the state; Mr Osborne wants to carry on squeezing public spending even after the overall budget is balanced.

Ed Balls MP, Labour’s Shadow Chancellor, responding to publication of the Charter for Budget Responsibility, said:

“Once again, a silly political stunt by George Osborne has totally backfired. David Cameron has just given a speech attacking Labour’s target to get the current budget into surplus. But this is exactly what they are putting to a vote in this new Charter.

“In the Budget George Osborne talked about a vote on balancing the overall budget. Today he and David Cameron have done a staggering U-turn on this vote and are now proposing a vote on the current budget, excluding capital investment. This is the same measure of the deficit the Labour Party has been committed to targeting for the last three years. They have also changed the fiscal mandate from being a ‘target’ to an ‘aim’.

“We said in January that we want to get the current budget into surplus and national debt falling as soon as possible in the next Parliament. This Charter is consistent with our position so we’ll vote for it. We’re not going to change our view about what’s in Britain’s best interests because of one of George Osborne’s silly games.

“Labour will cut the deficit every year and get the current budget into surplus, and the national debt falling, as soon as possible in the next Parliament. How fast we can go will depend on the state of the economy, including what happens to wages, growth, the housing benefit bill and events around the world.

“But our approach will be very different to the Tories. There will need to be sensible spending cuts in non-protected areas, but we will make fairer choices including reversing the Tory tax cut for millionaires and our plan will deliver the rising living standards and stronger growth needed to balance the books.
 
“In contrast the Tories are pursuing an increasingly unbalanced and extreme approach. They have chosen to pencil in even deeper spending cuts, which would return public spending to a share of GDP last seen in the 1930s.” 

Echoing Chris Leslie, he added:

“They are refusing to ask those with the broadest shoulders to make a greater contribution and ignoring the need for a plan to deliver the rising living standards that are vital to getting the deficit down. And they have now made £7 billion of unfunded tax promises, which can only be paid for by even deeper cuts to public spending or another Tory VAT rise.

“This is a complete own goal for the Chancellor. Perhaps George Osborne should spend less time thinking up silly political games which end up backfiring and more time sorting out the economy and trying to make his sums add up.” 

It’s very clearly all about ideological commitment for the Tories, at any cost, and not about meeting economic and social need.

And that isn’t democracy.

Thanks to Robert @LivingstonePics

Osborne’s Autumn statement reflects the Tory ambition to reduce State provision to rubble

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Osborne’s austerity measures have achieved nothing, except deepening poverty, widening economic inequality, and destitution for the poorest and most vulnerable communities – and Osborne announced in his Autumn statement that we face at least four more years of it.

Austerity is not an economic necessity, nor is it temporary measure to balance the books, but rather, it reflects the Conservative’s long-standing ideological commitment to dismantle the gains and achievements of the post war settlement: public services, the welfare state and the National Health Service.

The plans, according to the Treasury spending watchdog, the Office of Budget Responsibility, also presume the loss of a further one million public sector jobs by 2020, a renewed public sector pay squeeze and a further freezing of tax credits.

Robert Chote, the Office for Budget Responsibility chairman, conceded that the projections sent to him by the Treasury meant there would have to be a “very sharp squeeze” on spending in the next parliament. He added that so far the UK has seen 40 percent of the necessary cuts in this parliament and the next 60 percent would fall under the next parliament. 

The chairman says that spending on public services as a share of gross domestic product is set to fall by considerably more over the next five years than it did over the last five years, accounting for the lion’s share of the shift from a budget deficit of percent of GDP to a surplus of around 1 percent of GDP. He says that spending in non-protected departments will fall from £147 billion in 2014/15 to £86 billion in 2019/20 – on top of all the cuts to spending in recent years.

With a shortfall in tax receipts set to increase the size of the deficit by £25 billion during the next parliament, the Office for Budget Responsibility said the only way Osborne could balance the books would be through shrinking the state to a level not seen since before the Second World War:

“Total public spending is now projected to fall to 35.2 percent of GDP by 2019-20, taking it below the previous post-war lows reached in 1957-8 and 1999-2000 to what would probably be its lowest level in 80 years”.

The Office for Budget Responsibility (OBR) has written an extremely critical economic forecast and analysis of the spending cuts, clearly expressing the risks that the Chancellor is running and the scale of the damage his strategy will inflict on what remains of our public services.

Key findings from the damning analysis are:

The scale of planned post-election spending cuts is severe.

“Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices. Around 40 per cent of these cuts would have been delivered during this Parliament, with around 60 per cent to come during the next. The implied squeeze on local authority spending is similarly severe.

And as stated: “Total public spending is now projected to fall to 35.2 per cent of GDP in 2019-20, taking it below the previous post-war lows reached in 1957-58 and 1999-00 to what would probably be its lowest level in 80 years.”

The spending cuts are playing the most significant role in deficit reduction and of the tax rises Osborne introduced, it’s the most regressive (VAT) which are making the largest contribution:

“Just over 80 per cent of the reduction is accounted for by lower public spending. Just under 20 percent of the drop in borrowing is accounted for by higher receipts, with the majority having taken place by 2012-13, largely as result of rises in the standard rate of VAT.”

So despite the cuts, the Chancellor has failed to meet any of his original targets (to have closed the structural deficit over a parliament and to have debt falling as a proportion of GDP) and it’s unlikely that his new plan can be delivered.

The OBR say:

“On the Government’s latest plans and medium-term assumptions, we are now in the fifth year of what is projected to be a 10-year fiscal consolidation.

It remains on course to miss its supplementary target, to have net debt falling as a share of GDP in 2015-16.

On our best estimate of a like-for-like basis, borrowing is expected to be higher in the initial years of the forecast and slightly lower from 2016-17 than we thought in March. The largest single-year effect of a Government decision comes via its new assumption for total spending in 2019/20, although this does not appear in the Treasury’s table of policy decisions. This implies another cut in current spending by central government departments in that year equivalent to £14.5 billion”.

Wage growth has been very poor, which has affected income tax revenues. And growth is expected to slow after the election next year. In part, this will be because of the scale of government cuts, which of course also bring real economic risks.

The OBR say:

“Lower wage growth has reduced our income tax forecast. The fall in unemployment is not yet pushing pay settlements up significantly.

We still expect the economy to lose momentum through 2015 – and by a little more than we thought in March – thanks to weaker external demand and the expectation that consumer spending growth will slow to rates more in line with growth in people’s incomes.

The Government’s fiscal plans imply three successive years of cash reductions in government consumption of goods and services from 2016 onwards, the first since 1948. The corresponding real cuts directly reduce GDP. The economy should be able to adjust to such changes over time, but it is unlikely to be a simple process when monetary policy is already very loose and external demand subdued.

Over the course of the next Parliament, we project that government employment will fall by 1.0 million, compared to the 0.4 million decline that we are likely to have seen over this Parliament.”

The OBR’s damning conclusion is that real wages will not be back to even the pre-recession peak within five years (as opposed to household debt which is well on track to surpass it’s previous highs).

The OBR’s critical report on Osborne’s budget plans warns us that 60 percent  of the spending cuts have not yet been implemented in this parliament, and Osborne’s planned cuts will mean that by the end of the next government,  public spending is projected to fall to its lowest level as a proportion of GDP since the 1930s. And this was a period in history when we had no public services, no NHS, no effective welfare support, no education system, no social housing, no legal aid. Those post-war provisions have formed the very foundations of our democracy.

Osborne’s Autumn Statement has revealed that the Conservative mission to shrink the State will be complete by the budget of 2019/20 if their current budget plans remain unchallenged, and if the Conservatives remain in office.

They must not be permitted to inflict any further damage on the foundations of our once democratic society. We must ensure that they don’t.

From the Independent – The Autumn Statement: 4 charts that show how badly George Osborne has got it wrong:

GDP growth has been much lower than forecast in 2010


Government borrowing has been considerably higher every year

As a result the national debt is much higher as a share of GDP than predicted in 2010

Wages have also grown much less than expectations four years ago

 In the Autumn statement, the growth forecast for 2014 is likely to be, finally, in line with the 2010 forecast, at around three percent. But the forecast for public borrowing for 2014-15 is expected to be remain close to £100bn, meaning the deficit will remain stuck in cash terms. If the Chancellor ever had any genuine hopes of balancing the books by the end of the Parliament, the chances of fulfilling them  disappeared long ago.

Despite facing a global recession, the Labour Government invested in our public services, and borrowed substantially less in thirteen years than the Coalition have in just three years. UK citizens were sheltered very well from the worst of the global bank-induced crash.

Gordon Brown got it right in his championing of the G20 fiscal stimulus, agreed at the London summit of early April 2010, which was a continuation of his policies that had served to steer the UK economy out of the consequences of a global recession, and to protect citizens from the consequences.

Osborne’s policy of imposing austerity and budget cuts on an economy that was actually recovering was a catastrophic error. The austerity cuts have propelled the economy backwards and into depression; and, far from using public spending as a countervailing force against the cutbacks in private sector investment, the Coalition’s budget cuts served to aggravate the crisis. Many people are suffering terribly as a consequence, many  have been reduced to a struggle for basic survival.

People have died as a direct consequence of the austerity cuts.

Further cuts to provisions, services and welfare – support for the poorest – is unthinkable and untenable.

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Update: The Institute for Fiscal Studies (IFS) have also agreed with this analysis. In their report, they say: “The Autumn Statement means the UK is set for cuts on a colossal scale. One thing is for sure. If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition.”

 

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Many thanks to Robert Livingstone for his excellent and often prophetic memes